Our tax code is broken.  More specifically, to quote Obama’s 2010 bipartisan Commission on Fiscal Responsibility and Reform “The current individual income tax system is hopelessly confusing and complicated. Many taxpayers are required to make multiple computations to see if they qualify for a number of benefits and penalties, and many dole out large sums of money to tax preparers. Meanwhile, other taxpayers underreport their income and taxes, hoping to avoid the audit lottery. In short, the Commission has concluded what most taxpayers already know – the current income tax is fundamentally unfair, far too complex, and long overdue for sweeping reform.”

From flat taxes to fair taxes, there have been plenty of ideas and proposals for tax reform; I will build on the concepts identified in the above report: low rates, no breaks, everyone pays.

  • Low rates: The primary goal of taxes is to collect revenue in a manner that makes individuals incented and motivated to work and earn more.  Research has shown (as did the bipartisan committee above) that lower rates, in combination with the below, are the answer.
  • No breaks: Tax breaks (credits and deductions) are complex, confusing, and inefficient.  Furthermore, tax breaks promote inequality through deductions tied to life choices (children, home ownership, etc.) and deductions limited to those who can afford professional tax help.
  • Everyone pays: It is amazing that something as important as taxes – your duty as a citizen – can be avoided through charitable donations (up to 60%).  This is the equivalent of a vote of no confidence in our government.  Think about it: rather than invest in programs designed by the people, for the people, taxpayers (often wealthy ones) actively choose to divert their dollars elsewhere - this is unacceptable.  If it’s important enough to tax, all should pay their fair share.  (As a point of context, according to the Tax Policy Center, in 2018, charitable giving by individuals is estimated to reach $299 billion at an annual revenue loss of around $44 billion – that’s a lot of lost tax dollars).

Progressive taxes are valuable, but discussing any tax rate changes, to include those of the wealthy, prior to addressing the above concepts is backwards and illogical.  Let’s shift our focus from chastising the rich for paying less to the politicians who both created the enabling environment and have yet to pass a viable alternative.

Tax reform will not be easy, even Obama’s bipartisan committee couldn’t get consensus, but to quote the commission one last time: “The national interest, not special interests, must prevail.”  

Demand your politicians reform our tax code for low rates, no breaks, where everyone pays their fair share.

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